Dubbed the "iPad mini," the device allegedly includes a smaller 7.85-inch LCD screen with a lower resolution than the Retina display that was included with the iPad 3, which boasts a 9.7-inch screen.
Earlier reports suggested that Apple will use Samsung's QXGA technology in the latest iPad iteration and ditch LG's technology due to the lack of display quality. It is however believed LG Display and Taiwain's AU Optronics are mass-producing the device's display, which was last seen in the iPad 2.
The Journal cited two people familiar with the device, but declined to be named.
The smaller tablet is thought to be announced next week on October 10, according to media reports, but Apple has yet to issue an invitation to the press.
Since the launch of the original iPad in 2010, major players in the tablet space have ramped up development and production of smaller devices. Amazon, Google, and litigation rival Samsung are all producing smaller tablets to compete with each other and Apple's grip on the tablet market, which is thought to have around 70 percent of the tablet market share.
It's not the first time we have heard rumors that production has started, however. In mid-late September, a Taiwanese newspaper reported that manufacturing company Pegatron has a contract to manufacture the smaller iPads while Foxconn remains under pressure to meet orders for the iPhone 5.
Apple did not reply to questions outside of U.S. business hours.